Rising construction costs have resulted in a gravitation by potential purchasers of assisted living facilities away from development projects and toward existing facilities. When contemplating the acquisition of an existing facility, an important due diligence issue is the status of the facility with regard to zoning and land use restrictions. In many instances existing facilities do not comply with current dimensional or use restrictions applicable to the real property on which such facilities are located. Most sophisticated developers are aware that the Massachusetts Zoning Statute affords protection to pre-existing, non-conforming uses and structures.4 To the extent that a facility predates the first public notice of a zoning by-law rendering such facility non-compliant, a prospective purchaser may reasonably conclude that the facility is afforded some level of protection from the zoning statute. But is this the end of the analysis?

There are two additional inquiries which the prudent purchaser should investigate: (i) was the subject facility lawfully in existence prior to the zoning amendment rendering the facility non-compliant and (ii) in the event that the facility is destroyed by casualty will the owner have a right to reconstruct the facility to the same standard?

In order to answer the first question the prospective purchaser must undertake an historical analysis of the zoning by-law for the municipality in which the subject facility is located. The prospective purchaser (or more likely its learned counsel) will need to procure from the municipality a copy of the zoning by-law in effect at the time the subject facility was constructed. The prospective purchaser will need to review the historical zoning by-law to determine if the subject facility was in compliance with such zoning by-law at the time it was constructed (this article will refer to a facility in this category as a “lawfully” existing, pre-existing, non-conforming structure). In the event that the subject facility was not in compliance with the historical zoning by-law, and therefore does not qualify as a lawfully existing, preexisting, non-conforming structure, the prospective purchaser should next determine whether the statute of limitations relevant to zoning enforcement actions (as provided under the zoning statute) applies.5 In this regard, to the extent that the subject facility was constructed pursuant to a validly issued building permit and such facility has been in existence for at least six (6) years, the facility is protected from an enforcement action due to any use or dimensional nonconformities. To the extent that the subject facility was not constructed pursuant to a validly issued building permit, but has been in existence for at least ten (10) years, such facility is protected from an enforcement action with respect to dimensional nonconformities, but not with respect to use violations.

To answer the second question (i.e., whether the owner of the facility will have the right to reconstruct the facility in the event that it is destroyed) the prospective purchaser must analyze the language set forth in the zoning by-law for the municipality in which the facility is located. Many municipal zoning by-laws provide for the reconstruction of lawfully existing, pre-existing, non-conforming uses or structures (sometimes this right of reconstruction is limited in terms of either the degree to which the existing structure has been damaged, or the degree to which the structure may be permitted to be reconstructed). On the other hand, zoning by-laws for some municipalities fail to address this issue. In the absence of a zoning by-law allowing for the reconstruction of a pre-existing, non-conforming use or structure, the owner of a destroyed facility may be forced to comply with the zoning by-law in effect at the time the subject facility is destroyed. While there is some case law allowing for the reconstruction of lawfully existing pre-existing, non-conforming uses or structures in the absence of a zoning by-law addressing the issue, and while some municipalities will allow for such reconstruction, notwithstanding the absence of such a by-law; a prudent purchaser will treat the absence of a zoning by-law addressing this issue as a risk factor. If the subject property is not a lawfully existing, pre-existing, nonconforming structure, the analysis is simple: there is no right to reconstruct the structure to re-establish the nonconformity, notwithstanding the fact that it may enjoy the protection of the statute of limitation provisions discussed above (i.e. the reconstructed facility must comply with zoning then in effect).

It is also worth noting that if the owner of a destroyed facility is unable to reconstruct the facility, the owner’s recovery under a standard casualty insurance policy will likely be an amount far less than the fair market value of the facility prior to destruction.